The Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP) has called upon the government to announce clear and robust economic strategies, as the country has stuck in low economic growth situation, where double-digit policy rate for the last few years has diminished capacity to increase domestic production, and exports, negatively impacting domestic resource mobilization.
FPCCI former president and BMP Chairman Mian Anjum Nisar said that the government will have its work sharply cut out as far as the economic challenges are concerned. Coming at the back of fast-unfolding climate change crisis that pushed millions into poverty with little fiscal capacity of government to provide anywhere near close to what was needed in stimulus spending. Then there is acute debt distress, and seriously high inflation at the back of global aggregate supply shock, and accentuated by a world of rising conflicts, mainly in Ukraine, and the Middle East. They emphasized that such transparency from the government is crucial, as the country has had trouble raising enough money to cover its expenses.
He said that the domestic investment at the moment is alarmingly low which has sent a negative signal to the potential foreign investors and now is the time that the federal government should give some patient hearing to the private sector calling. They said if the government was seriously desirous of having economic turnaround in the coming years it would have to do two things that are: an immediate freeze on domestic and foreign borrowing and secondly put in place a well-tailored strategy to show-case Pakistan’s potentials to the outer world.
Anjum Nisar said that even though Pakistan’s economic crisis is a recurring factor in the country’s political unrest, it has a history of ignoring the nation’s true issues, which include poor governance, a broken judicial system, outdated laws, complicated tax system, lack of transparency, duplication in the government system, ineffective bureaucracy, improper use of our human, natural and water resources, lack of efficient local government, inadequate data for country’s planning, and the consistent flaws in policies in execution by the government departments.
He said that Pakistan’s GDP growth rate has always remained below its potential despite efforts to boost economic growth. He said that the development of important sectors and investment prospects was hampered by inadequate revenue collection, structural problems, and governance issues.
BMP Chairman said that due to the low tax-to-GDP ratio, borrowing and outside help are heavily relied upon to close the fiscal imbalance. There is a recurring budget deficit because the government spends more than it takes in. The national debt burden has risen, as a result, needing substantial financial resources for debt repayment. Both internal and external debt in Pakistan has been constantly rising.
Anjum Nisar was of the view that the SBP had taken the decision to enhance the policy rate as per instruction of the International Monetary Fund (IMF), as the decision is not based keeping in view the situation of trade and economy, he added. They said the SBP had taken a unilateral decision in view of the absence of any government. They said the SBP had previously cut the interest rate on government intervention and pressure from businesses, but now it was free to raise the policy rate.
He cannot understand how the policy rate will curb food inflation as the high-interest rate and rupee depreciation will increase the cost of doing business, he said.
He said the SBP had been watching the rupee fall against the greenback from the sidelines since the political uncertainty has gripped the country. Now it has come up with minor cut in interest rates to do the rest of the damage to the economy.
He said inflation in Pakistan was cost-push, which spiked due to surging prices of commodities in world markets as well as deprecation of the rupee against the dollar.
The economy doesn’t have the capacity to absorb the high interest rate as it was already struggling with the weak exchange rate,” he pointed out. He added that the free hand given to the SBP was in fact making matters complicated for the country, as well as industry. Ruling out the impression that high interest rate would dent credit off-take to industry, they said in reality only large businesses were the beneficiaries of bank credits. SMEs are still deprived of this facility and will remain so in the present situation, he said.
